Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CTC/455/2015

ADMINISTRATIVE APPEALS CHAMBER

Before Judge Mark

Decision:  The appeal is allowed.  I set aside the decision of the tribunal and I substitute my own decision setting aside the decisions of HMRC that the claimant was not entitled to tax credits as a single person from 6 April 2011 and imposing a penalty of £2260 for allegedly negligently not taking enough care when making an allegedly incorrect single person claim. 

I accept the invitation of HMRC on this appeal to find that the claimant was entitled to tax credits as a single person in 2011/2012, and that there was no basis for terminating her award in 2012/2013.  The penalty issued by HMRC is cancelled because it has not been shown that the claimant made an incorrect declaration, let alone that she was negligent.

REASONS FOR DECISION

1.    This a supported appeal from a decision of the First-tier Tribunal on 3 October 2014 dismissing the Applicant’s appeal from the above decisions of HMRC made in February and March 2013.  The claimant and her husband, PP, had submitted a joint claim for tax credits in October 2003, declaring that the household contained one dependant child, EH, born in October 2000.  They maintained their joint claim until March 2008.  In June 2008, the claimant claimed as a single person stating that she had two dependant children, EH and MP, the latter having been born in May 2005.  She was awarded tax credits on this basis until they were removed by the decision in February 2013.  In essence the reasons given were that PP had been using the claimant’s address for financial purposes and was on the voters’ roll at that address since 2006 and that the claimant had not provided documentary evidence of any other address for PP (she had stated that he sometimes lived in Turkey and sometimes with friends) and that she had not provided evidence in the form of bank statements to show financial independence during the period in question (file, pp.37-38). 

2.    Quite how this showed on the balance of probabilities that the claimant and PP were living together as husband and wife, without a shred of evidence that he had ever been seen at the property or with the claimant during that period, I fail to understand.

3.    It would appear from the tribunal file that the claimant wrote that unfortunately she could not attend a hearing because she was currently receiving chemotherapy for breast cancer.  This does not appear to have prompted any consideration by the tribunal as to whether special steps should be taken to obtain her evidence bearing in mind the provisions of the First-tier and Upper Tribunal Practice Direction “Child Vulnerable Adult and Sensitive Witnesses” and that as a person receiving any form of health care the claimant came within the definition of “vulnerable adult” in s.59(1)(d) of the Safeguarding Vulnerable Groups Act 2006, so that the practice direction applied to her.  Instead it took at face value her statement that she did not want to have a hearing and dealt with the matter without a hearing. 

4.    Nor does it appear to have considered its duty under regulation 2(2)(c) of the Tribunal Procedure (First-tier Tribunal) (SEC) Rules 2008 of ensuring, so far as practicable, that the parties were able to participate fully in the proceedings and there is no indication of any consideration pursuant to rule 27(1) of those Rules of whether the tribunal considered, before making this decision, whether it was able to decide the matter without a hearing.  This is despite the fact that the claimant, in her letter of appeal, to which there is no reference in the decision, explained where PP had been living in the period under review and the steps she had taken to try to provide the tribunal with his address and despite her making it clear that it was unfortunate that she could not attend because of her chemotherapy.  In this alone it was in error of law in that it failed to consider how to facilitate her giving of evidence which was clearly needed if the tribunal considered that she had a case to answer (DT v Secretary of State [2015] UKUT 390 (AAC)).

5.    The tribunal dismissed the claimant’s appeals.  After referring to the documentary evidence relied on by HMRC, the tribunal found that the claimant and PP “are married, jointly own the matrimonial home, have two children together, have a joint mortgage on their home, and joint responsibility for utility bills.” (Para.1(j) of the statement of reasons).  At paragraph 2(e) the tribunal went on to say that the findings of fact, especially those at paragraph 1(j) led it to conclude that the relationship between the claimant and PP “as stable and ongoing, that there was evidence of financial support on a mutual basis, there was a shared matrimonial home, and although there was no evidence of them being acknowledged as a couple in public, that was likely to be the case as was the existence of a physical relationship since they had children together and shared the matrimonial home.  These conclusions fortified Tribunal in its conclusions that [the claimant and PP] were a couple.”

6.    There was in fact not a shred of evidence that they owned the matrimonial home together or had a joint mortgage, or that PP was the father of EH, who had a different surname.  There was no identifiable evidence of financial support on a mutual basis.  The continuing presence of PP on utility bills did not provide any evidence of this and there was no suggestion that he had contributed to mortgage payments or made any other financial contribution in that time.  Nor was there any evidence that the claimant had provided him with any financial support.  The second child had been born in May 2005, long before the couple were said to have split in March 2008.  The “Findings of Fact”, as the tribunal described them were almost entirely either without any evidential foundation or irrelevant to the question of whether the claimant and PP were still living together as husband and wife in 2011.

7.    In her letter of 4 January 2015 seeking permission to appeal, the claimant drew attention to the fact that there was no evidence to support most of the findings of fact in paragraph 1(j) and to the irrelevance of the other findings.  Despite this, and the paucity of the other evidence, the District Tribunal Judge refused permission to appeal, a decision as astonishing as that made by the tribunal.  This was a plain case in which the decision of the tribunal ought to have been set aside and either a decision made in favour of the claimant (a decision which HMRC accepts to be inevitable on this appeal) or steps taken to enable the claimant to give evidence and address any concerns the tribunal had.  If she still claimed to be too unwell to attend a hearing, she might have been asked for medical evidence of this, but if this was provided, then alternative steps should have been taken to obtain her evidence on the issues in the case.

8.    It is also apparent that, having (wrongly on the evidence) concluded that PP was living at the same address as the claimant, the tribunal failed to investigate the facts so as to consider whether the parties were in fact living together in such a way that the claim for tax credits needed to be a joint one (see as to this DG v HMRC [2013] UKUT 631 (AAC) and the cases there referred to).  It also overlooked, or at least failed to refer to and make findings as to, evidence at p.14 of the file that PP had another address from July 2008. 

9.    The tribunal also erred in law in that it failed to give any proper consideration as to whether the claimant was negligent in respect of the information she gave and as to the appropriateness of the penalty if she was.  She was found by the tribunal to have been negligent in failing accurately to complete her annual declaration by reporting that she and PP were a couple.  As pointed out by the Upper Tribunal Judge who gave permission to appeal, and as is apparent from DG v HMRC, applying the definition of a couple is not necessarily straightforward.  The tribunal needed to explain in what respect the claimant had been negligent. 

10. Finally, having concluded that the claimant had been negligent, it then had to exercise its own reasoned discretion as to whether the penalty was appropriate, excessive or insufficient and confirm, reduce or increase it accordingly (see para.2(1) of Schedule 2 to the Tax Credits Act 2002) taking into account all the facts.  It failed even to begin to do so. 

11. I leave for future consideration the question whether a penalty should be imposed in circumstances where negligence is established on the balance of probabilities but not beyond reasonable doubt and draw attention to the discussion as to this in the commentary on section 31 of the Tax Credits Act 2002 in vol.IV of the 2015/16 edition of Social Security Legislation.

12. I set aside the decision of the tribunal and I accept the concession of HMRC on this appeal that there was no sufficient evidence, the burden of proof being on HMRC, to support the conclusion that the claimant was living as a couple with PP, and that in all the circumstances it would not be right to remit the matter to give HMRC the opportunity of adducing further evidence which they do not presently have.  I am therefore able to substitute my own decision as set out above.

(signed) Michael Mark

Judge of the Upper Tribunal

22 October 2015